ECB to announce 600 billion euro QE program on Thursday: traders

Reuters Staff

2 Min Read

(Reuters) - The European Central Bank will announce a 600 billion euro sovereign bond buying program this week, money market traders polled by Reuters say, but they also believe this will not be enough to bring inflation up to target.

In the past two months traders have consistently predicted that the ECB would undertake quantitative easing, considered the bank’s final weapon against deflation.

Eighteen of 20 in Monday’s poll said the bank would announce QE on Thursday.

Calls for such a step have escalated after inflation turned negative in December.

But 14 of 18 traders said such bond buying would not be enough to bring inflation back up to the central bank’s target 2 percent ceiling.

“Will it be enough to raise inflation? That is questionable, probably not. The problem is whether throwing extra money is the solution. What is lacking is final demand in the area,” said a euro money market trader.

A separate Reuters poll of economists gave a near-certain 90 percent chance the ECB would embark on full-blown QE.

The regular survey of 22 traders showed the ECB is expected to allot 110 billion euros at its weekly refinancing tender, slightly less than the 113.986 billion euros maturing this week.

The poll also showed banks are expected to repay 10 billion euros of the ECB’s three-year crisis loans next week, less than the 13.9 billion euros they will return this week.